California Court Rules Disability Claim Accrues When Disability Terminates

In Gray v. United of Omaha Life Insurance Co. (United), after working for a southern California television station for 15 years and rising to the position of Vice President of Sales, plaintiff was injured in a car accident. He was completely bedridden for two months and was left with limited use of his limbs and suffered from chronic pain. He attempted to return to work, using a wheelchair part-time, but it was too much for him and he had to have more surgery.

Soon after plaintiff left work, the television station fired him. He only learned from another employee that he had long-term disability coverage through the television station and that United was the insurer. The employer refused to give him a copy of the policy, and he did not receive one until after his attorney filed a suit for wrongful discharge and retaliation. Plaintiff then filed a claim for long-term disability benefits.

When Plaintiff was unable to submit all supporting documentation, United denied his claim on the grounds that he had not timely filed proof of his loss. Gray’s counsel received United’s denial letter on September 30. 2016, and filed this ERISA lawsuit on Monday, October 3, 2016.

United moved for a dismissal on the grounds that the statute of limitations began to run on the date of Gray’s injury in May 2011. Therefore, his claim filed August 18, 2015, was beyond the four-year time limit. The Court disagreed, holding that the correct interpretation is that the “limitations period accrues at the time disability terminates…” not at the onset of the disability.

Timeliness of filing the ERISA lawsuit

Since there is no specific statute of limitations for an ERISA lawsuit, the Court analyzed case law from the Ninth Circuit and the California Supreme Court as well as California statutes and the specific United policy language in order to determine the timeliness of the lawsuit. California Civil Code Section 337 provides a four-year statute of limitations for actions based on written contracts. Applying that law, Gray’s ERISA lawsuit was timely, having been filed just three days after United denied his administrative appeal.

Timeliness of Filing Claim for Disability with United

United also argued that since Plaintiff was injured in May 2011, and did not file his claim for disability until August 18, 2015, the claim was filed more than four years after the onset of the disability so was time-barred. The court applied California Insurance Code 10350 which provides in relevant part, when “the Group Policy’s terms are less favorable to Plaintiff than the statutory language,” the statute “will override the terms of the Group Policy.”

The Court noted that under Section 10350.7, “proof of loss is not due until the termination of the period for which the employer owes benefits.” This means that a claimant can submit proof of loss at any time until he is “no longer disabled,” or “no longer eligible for long term disability insurance under the relevant plan.” Since Plaintiff “suffers from an ongoing disability,” the statute of limitations for him to provide proof of loss did not begin to run until United denied his appeal, which meant he was no longer eligible to receive benefits. Since this occurred “mere days before Plaintiff filed his complaint,” his action is well within the four-year statute of limitations.

This case was not handled by our office, but we hope it is instructive to those faced with their insurer’s attempt to dismiss their disability claim as filed beyond the statute of limitations. If you have any questions about this case, or disability claims in general, contact one of our attorneys at Dell & Schaefer for a free case evaluation.

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